Exercise 19-7 Income reporting under absorption costing and variable costing LO P2
[The following
information applies to the questions displayed below.]
Oak Mart, a producer of solid oak tables, reports the following
data from its second year of business.
Sales price per unit | $ | 330 | per unit |
Units produced this year | 110,000 | units | |
Units sold this year | 113,500 | units | |
Units in beginning-year inventory | 3,500 | units | |
Beginning inventory costs | |||
Variable (3,500 units × $130) | $ | 455,000 | |
Fixed (3,500 units × $75) | 262,500 | ||
Total | $ | 717,500 | |
Manufacturing costs this year | |||
Direct materials | $ | 46 | per unit |
Direct labor | $ | 70 | per unit |
Overhead costs this year | |||
Variable overhead | $ | 3,200,000 | |
Fixed overhead | $ | 7,400,000 | |
Selling and administrative costs this year | |||
Variable | $ | 1,400,000 | |
Fixed | 4,400,000 |
1. Prepare the current-year income statement for the company using variable costing.
In: Accounting
select one of the following types of businesses:
Describe how your chosen business might use Managerial Accounting to support internal AND external Stakeholders.
In: Accounting
The total equity of the business is P500, 000. Owner’s equity is P400, 000. Plant and Equipment is 45% of total Assets, the total current assets is
Select one:
a. P225, 000
b. P220, 000
c. P275, 000
d. P100,000
Mr. A has the following revenue transactions during April of the current year: Rendered services: Cash, P5, 000 & on credit, P3, 500; received P5000 advance payment for services to be rendered in May. The amount of income to be recognized in April is
Select one:
a. P5,000
b. P13,500
c. P10,000
d. P8,500
Odd-man out: Select the word that does not belong to the group.
Select one:
a. Balance Sheet
b. Statement of Cash Flow
c. Worksheet
d. Income Statement
The company's performance for a given accounting period is measured and evaluated through the income statement.
Select one:
True
False
Odd-man out: Select the word that does not belong to the group.
Select one:
a. Factory Insurance
b. Depreciation of Delivery Equipment
c. Salaries of factory supervisor
d. Factory Supplies
In: Accounting
QuickBooks Project
Prepare a Trial Balance for a Company for Jan. given the following information
Jan 1, 2019 | Began business by depositing $7,000 in a bank account in the name of the company, in exchange for 7,000 shares of $1 par value common stock |
Jan 2, 2019 | Ordered supplies, $800 |
Jan 2, 2019 | Borrowed $12,000 from the bank that is due in 2 years at 10% |
Jan 3, 2019 |
Purchased equipment for cash $4,000 |
Jan 4, 2019 | Made two months' rent payment on the store, $2,000 |
Jan 7, 2019 | Received supplies ordered on Jan 2 and agreed to pay half on the amount in 10 days and the rest in 30 days |
Jan 8, 2019 | Purchased merchandise inventory on account, $7,000 |
Jan 9, 2019 | Paid for advertising to announce the grand opening, $7,000 |
Jan 12, 2019 | Grand opening |
Jan 17, 2019 | paid half the amount owed on the supplies purchased on Jan 7. |
Jan 19, 2019 | weekly sales of $3,000, merchandise costing $2,000, half cash and half on account |
Jan 26, 2019 | Received payment on account $700 |
Jan 26, 2019 |
Weekly cash sales of $4,500, merchandise costing $2,000, half cash and half on account |
Jan 31, 2019 |
Received utility bill for January, $300 |
Jan 31, 2019 | one month's rent expired |
Jan 31, 2019 |
accrued one month's interest, $100 |
Jan 31, 2019 | Depreciation expense for the month is $100 |
Jan 31, 2019 | The income tax rate is 30% |
Here is a list of the accounts the company uses:
Account | Type |
Cash | Bank |
Accounts receivable |
other current asset |
merchandise inventory | other current asset |
prepaid rent | other current asset |
supplies | other current asset |
equipment | Fixed asset |
equipment - accum Depr | Fixed asset |
Accounts payable | other current liability |
Income taxes payable | other current liability |
payroll liabilities | other current liabilities |
notes payable | long term liabilities |
common stock | equity |
income summary | equity |
retained earnings | equity |
sales | income |
cost of goods sold | cost of goods sold |
advertising expense | expense |
depreciation expense | expense |
income tax expense | expense |
payroll expense | expense |
rent expense | expense |
supplies expense | expense |
utility expense | expense |
In: Accounting
How does one determine whether a warranty constitutes a separate performance obligation within a contract?
Please be as thorough and as descriptive as possible.
In: Accounting
Outsourcing business function is a vital part, though outsourcing social media
marketing\ digital marketing, is a very easy task to learn. The companies outsource it
without thinking how to grasp the knowledge themselves. What measures can be taken
to make it more cost-effective in this regard?
in simple words: why outsourcing social media marketing/digital marketing is bad for businesses?? and why should businesses need to treat social media marketing as a core business process?
In: Accounting
Dunnes Stores has two service department, Advertising and Administration, and two operating departments, Hardware and Automotive. Sales, COGS, and direct expenses are given below. Complete the following table, including allocation of $220,000 of indirect costs. Indirect costs are allocated on the basis of square footage:Advertising Department:750 square feet, Administration Department:1,500 square feet, Hardware Department:3,000 square feet, Automotive Department:9,750 square feet
Dunnes Stores |
|||||
Revenues and Expenses |
|||||
Y/E December 31, 2018 |
|||||
Service Departments |
Operating Departments |
||||
Totals |
Advertising |
Admin |
Hardware |
Automotive |
|
Sales |
1,500,000 |
$675,000 |
$825,000 |
||
COGS |
375,000 |
100,000 |
275,000 |
||
Direct Expenses |
275,000 |
50,000 |
100,000 |
50,000 |
75,000 |
Indirect Expenses |
220,000 |
||||
Totals |
|||||
Allocated Service Dept. Expenses |
|||||
Dept. Name |
|||||
Dept. Name |
|||||
Total Expenses Allocated to Operating Depts. |
Use the table above to allocate the service department expenses to the operating departments. Advertising Costs are allocated on the basis of number of advertisements in each department. Hardware had 60 ads and Automotive had 90. Administrative costs are allocated on the basis of sales. Complete the following Departmental Income Statement
Dunnes Stores |
|||
Departmental Income Statement |
|||
Y/E December 31, 2018 |
|||
Hardware |
Automotive |
Combined |
|
Sales |
|||
Cost of Goods Sold |
|||
Gross Profit |
|||
Operating Expenses |
|||
Direct Expenses |
|||
Indirect Expenses |
|||
Share of Advertising Expenses |
|||
Share of Admin Expenses |
|||
Total Operating Expenses |
|||
Operating Income (Loss) |
Complete the following Income Statement showing Departmental Contribution to Overhead
Dunnes Stores |
|||
Income Statement Showing Departmental Contribution to Overhead |
|||
Y/E December 31, 2018 |
|||
Hardware |
Housewares |
Combined |
|
Sales |
|||
Cost of Goods Sold |
|||
Gross Profit |
|||
Direct Expenses |
|||
Departmental Contribution to Overhead |
|||
Indirect Expenses |
|||
Share of Advertising Expenses |
|||
Share of Administrative Expenses |
|||
Total Operating Expenses |
|||
Operating Income (Loss) |
In: Accounting
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt:
1 |
Fabrication Department factory overhead |
$561,600.00 |
2 |
Assembly Department factory overhead |
241,500.00 |
3 |
Total |
$803,100.00 |
Direct labor hours were estimated as follows:
Fabrication Department | 4,800 | hours |
Assembly Department | 5,250 | |
Total | 10,050 | hours |
In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows:
Production Departments | Gasoline Engine | Diesel Engine |
Fabrication Department | 3.1 dlh | 1.8 dlh |
Assembly Department | 1.8 | 3.1 |
Direct labor hours per unit | 4.9 dlh | 4.9 dlh |
Required: | |
a. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.* |
b. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department.* |
c. | (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for your answer. |
*If required, round all per-unit answers to the nearest cent. |
In: Accounting
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:
As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:
Cash | $ |
62,000 |
||
Accounts receivable |
217,600 |
|||
Inventory |
61,050 |
|||
Buildings and equipment (net) |
372,000 |
|||
Accounts payable | $ |
91,725 |
||
Common stock |
500,000 |
|||
Retained earnings |
120,925 |
|||
$ |
712,650 |
$ |
712,650 |
|
Actual sales for December and budgeted sales for the next four months are as follows:
December(actual) | $ |
272,000 |
January | $ |
407,000 |
February | $ |
604,000 |
March | $ |
319,000 |
April | $ |
215,000 |
Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.
The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
Monthly expenses are budgeted as follows: salaries and wages, $37,000 per month: advertising, $59,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,620 for the quarter.
Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.
One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.
During February, the company will purchase a new copy machine for $3,200 cash. During March, other equipment will be purchased for cash at a cost of $81,000.
During January, the company will declare and pay $45,000 in cash dividends.
Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the data above, complete the following statements and schedules for the first quarter:
1. Schedule of expected cash collections:
2-a. Merchandise purchases budget:
2-b. Schedule of expected cash disbursements for merchandise purchases:
3. Cash budget:
4. Prepare an absorption costing income statement for the quarter ending March 31.
5. Prepare a balance sheet as of March 31.
In: Accounting
blake closed his business on april 1 2018 he had no carrryovers losses and all assets were fully depreciated if blake elects to use the office in home simplified method what amount of his schedule c net profit or loss
In: Accounting
Now assume that Temp Force's dividend is expected to experience nonconstant growth of 30% from year 0 to Year 1, 25% from Year 1 to Year 2, and 15% from Year 2 to Year 3. After Year 3, dividends will grow at a constant rate of 6%. What is the stocks intrinsic value under these conditions? What are the expected dividend yield and capital gains yield during the first year? What are the expected dividend yield and capital gains yield during the fourth year (from Year 3 to Year 4)?
Dividends | ||
D0 | 2 | $ 2.00 |
D1 | 2*(1.30) | $ 2.60 |
D2 | 2.6*(1.25) | $ 3.25 |
D3 | 3.25*(1.15) | $ 3.74 |
Rs | 13% |
g | 6% |
Expected Dividend Yield | 7% |
Capital Gain Yield | 6% |
Total Return | 13% |
Expected Rate of Return | 13% |
In: Accounting
Now why is it important from an accounting perspective to classify a lease into operating or capital lease? What is the criteria to classify the lease into operating and capital lease ? Do you think the lessee tends to prefer an operating lease or a capital lease? Why?
In: Accounting
Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.60 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 7,500 hundred square feet Travel to jobs Miles driven 394,000 miles Job support Number of jobs 1,800 jobs Other (organization-sustaining costs and idle capacity costs) None Not applicable The total cost of operating the company for the year is $363,000 which includes the following costs: Wages $ 138,000 Cleaning supplies 28,000 Cleaning equipment depreciation 15,000 Vehicle expenses 40,000 Office expenses 68,000 President’s compensation 74,000 Total cost $ 363,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages 77 % 11 % 0 % 12 % 100 % Cleaning supplies 100 % 0 % 0 % 0 % 100 % Cleaning equipment depreciation 75 % 0 % 0 % 25 % 100 % Vehicle expenses 0 % 84 % 0 % 16 % 100 % Office expenses 0 % 0 % 56 % 44 % 100 % President’s compensation 0 % 0 % 31 % 69 % 100 %
Required:
1. Prepare the first-stage allocation of costs to the activity cost pools.
2. Compute the activity rates for the activity cost pools.
3. The company recently completed a 800 square foot carpet-cleaning job at the Flying N ranch—a 53-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.
4. The revenue from the Flying N ranch was $188.80 (800 square feet @ $23.60 per hundred square feet). Calculate the customer margin earned on this job.
In: Accounting
Sales revenue $5,625,000
Variable manufacturing expense 1,875,000
Variable selling and admin expense 625,000
Fixed manufacturing expense 1,000,500
Fixed selling and administrative expense 562,000
Total Expenses (4,062,500)
Net operating income $ 1,562,500
Company produced and sold 625,000 units of products.
Requirements:
In: Accounting
CREATE A Statement of Earnings, Statement of Retained Earnings, Statement of Financial Position, Journal Entries for January 2019:
Post-Closing Trial Balance
December 31, 2018
Debit |
Credit |
|
Cash |
18,200 |
|
Accounts receivable |
3,960 |
|
Supplies |
1,380 |
|
Prepaid insurance |
750 |
|
Prepaid rent |
3,800 |
|
Furniture |
5,000 |
|
Accumulated depreciation, furniture |
450 |
|
Equipment |
8,000 |
|
Accumulated depreciation, equipment |
4,000 |
|
Accounts payable |
2,700 |
|
Accrued liabilities |
190 |
|
Unearned service revenue |
1,900 |
|
Common shares |
20,000 |
|
Retained earnings |
11,850 |
|
Total |
41,090 |
41,090 |
Business Activities for January, 2019
In: Accounting